Stock-based compensation
expense during the three months ended April 30, 2017 and 2016 amounted to approximately $4.2 million and $446,000 respectively.
Stock-based compensation expense during the six months ended April 30, 2017 and 2016 amounted to approximately $8.6 million and
$993,000 respectively. Stock-based compensation expense is recorded in general and administrative expenses in the accompanying
consolidated statements of operations.

On February 8, 2017, the
Board appointed Steve Gorlin as a Class II director with a term expiring in 2019 and Dr. Jon Mogford as a Class III director with
a term expiring in 2017 to fill vacancies created upon the resignations of Messrs. Brauser and Honig. In addition, Mr. Gorlin was
appointed as a member of each of the Board’s Audit, Compensation and Nominating and Corporate Governance Committees. Each
of Mr. Gorlin and Dr. Mogford are deemed an “independent” director as such term is defined by the rules of The NASDAQ
Stock Market LLC. There are no family relationships between either of Mr. Gorlin and Dr. Mogford and any of our other officers
and directors. Mr. Gorlin and Dr. Mogford were each granted (i) an option to purchase up to 50,000 shares of the Company’s
common stock at an exercise price equal to $4.72 per share (the “Options”) which Options will vest in 24 equal monthly
installments commencing on the one month anniversary of the grant date and (ii) a restricted stock award of 50,000 shares of common
stock that will vest in 24 equal monthly installments commencing on the one month anniversary of the grant date (the “RSUs”).
The Options and the RSUs were granted pursuant to the Company’s 2017 Equity Incentive Plan (the “2017 Plan”).
The 2017 Plan, the vesting and the exercise of the Options and the vesting of the RSUs are subject to stockholder approval.

A summary of the Company’s
employee stock option activity in the six months ended April 30, 2017 is presented below:

Number of

shares

Weighted-Average

Exercise Price

Outstanding - October 31, 2016

383,210

$

5.74

Granted

2,715,000

$

3.49

Exercised

(121,698

)

$

4.83

Outstanding - April 30, 2017

2,976,512

$

3.72

Options exercisable - April 30, 2017

767,342

$

4.19

Weighted-average fair value of options granted during the period

$

2.37

A summary of the Company’s
non-employee stock option activity in the six months ended April 30, 2017 is presented below:

Number of

shares

Weighted-Average

Exercise Price

Outstanding - October 31, 2016

-

$

-

Granted

52,000

$

4.71

Outstanding - April 30, 2017

52,000

$

4.71

Options exercisable - April 30, 2017

4,333

$

4.71

The value of employee
and non-employee stock option grants is amortized over the vesting period of, generally, one to three years. As of April 30, 2017,
there was approximately $6.3 million of unrecognized compensation cost related to non-vested employee and non-employee stock option
awards, which is expected to be recognized over a remaining weighted-average vesting period of 0.8 years.

The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions
for the six months ended April 30, 2017:

Risk free annual interest rate

1.78-2.28

%

Expected volatility

71.65-86.34

%

Expected life

5.04-6.00

Assumed dividends

None

A summary of the Company’s
restricted stock activity in the six months ended April 30, 2017 is presented below:

Number of

shares

Weighted-Average Grant-Date Fair Value

Unvested - October 31, 2016

274,829

$

6.00

Granted

1,031,000

$

4.56

Vested

(925,488

)

$

4.00

Unvested - April 30, 2017

380,341

$

6.97

During the six months ended
April 30, 2017, the Company granted 1,031,000 restricted shares to employees and non-employees.

The weighted-average fair
value of restricted shares granted during the six months ended April 30, 2017 was $4.56. The total fair value of restricted stock
granted during the six months ended April 30, 2017 was approximately $4.7 million.

The value of restricted
stock grants is measured based on its fair value on the date of grant and amortized over the vesting period of, generally, six
months to three years. As of April 30, 2017, there was approximately $2.4 million of unrecognized compensation cost related to
unvested restricted stock awards, which is expected to be recognized over a remaining weighted-average vesting period of 0.7 years.